How to Start an LLC in Illinois: Steps, Annual Report, Tax

How do I start an LLC in Illinois?

File articles of organization with the Illinois Secretary of State and pay $150, or $400 if the LLC can create series (805 ILCS 180/50-10). After that, every Illinois LLC files an annual report before its anniversary month, and its Illinois tax return depends on how many owners it has and how it is taxed federally.

An Illinois LLC is not simple when it has two or more members (an Illinois partnership return, K-1-P statements to each member and replacement tax), when the owners want S corporation tax or the Illinois PTE tax, or when a member lives outside Illinois. Each of those changes which returns are due and who pays. A married couple who both own the LLC are two members (spouse and family LLCs).

What to gather before filing:

• Each member's legal name and ownership percentage
• Whether the LLC will be run by its members or by managers, and each manager's name and business address
• The registered agent's name and Illinois street address
• The LLC's principal business address and the organizer's name and address
• An estimate of first-year profit and how much of it is earned in Illinois

What does it cost to form an LLC in Illinois?

The state charges $150 to file articles of organization and $75 for each annual report. An LLC able to create series pays more to form, and its annual report costs more for each series with a certificate of designation in effect. All fees below are set by 805 ILCS 180/50-10, the rush fee by 805 ILCS 180/50-50 and the penalty by 805 ILCS 180/50-15.

A paid registered agent or filing help is a separate cost; LLC cost by state adds those up. An LLC that trades under another name files an assumed name application with the Secretary of State; that fee depends on the year it is filed (805 ILCS 180/50-10).

What goes in Illinois articles of organization?

Illinois articles of organization must state the LLC's name, purpose, registered agent, managers and organizers, under 805 ILCS 180/5-5:

• Name and principal place of business. The principal place of business does not have to be in Illinois. The name must include "limited liability company", "L.L.C." or "LLC" and may not include terms such as "Corporation", "Inc.", "Ltd." or "Co." (805 ILCS 180/1-10).
• Purpose. The stated purpose may be any lawful business.
• Registered agent and registered office. The LLC must keep an agent and office in Illinois at all times (805 ILCS 180/1-35). Who can serve, and how to change one, is in registered agents.
• Members. A confirmation that the LLC has at least one member.
• Management. The name and business address of every manager and of any member with a manager's authority. Whether the LLC is member-managed or manager-managed is set in its operating agreement (805 ILCS 180/1-5).
• Organizers. The name and address of each organizer. An organizer signs the articles, need not be a member, and cannot be an individual under 18 (805 ILCS 180/5-1).
• Duration. Perpetual unless the articles say otherwise.

The articles can set an effective date up to 60 days after filing, which helps when the business should start on a set date, such as the first day of a month. An LLC that wants series with separate liability must say so in its articles and file a certificate of designation for each series (805 ILCS 180/37-40). Licensed professionals should first read professional LLCs.

When is the first Illinois LLC annual report due?

The first Illinois LLC annual report is due before the LLC's first anniversary month, within the 60 days before the first day of that month. The anniversary month is the calendar month in which the Secretary of State filed the articles (805 ILCS 180/50-1; 805 ILCS 180/1-5). For an LLC formed in January, February or, in most years, March, that window opens late in the year of formation. The same window repeats every year, whether or not the LLC had any activity.

The report costs $75, plus $50 per series. It updates the LLC's name, registered agent and office, principal place of business, and every manager or member with a manager's authority. A manager signs it, or, if there is none, a member the members designate.

A report mailed before the first day of the anniversary month, with proof of mailing, counts as on time. If the Secretary of State returns a report for corrections, no late penalty applies when the corrected report comes back within 60 days of the original due date.

What happens if the Illinois annual report is late?

An Illinois LLC that misses its annual report falls out of good standing on the first day of its anniversary month, then owes a penalty, and is dissolved by the state if it stays in default.

The delinquency notice goes by regular mail to the registered office, so a stale agent address can mean the notice never arrives. A bank, a buyer or another state may ask for proof of good standing; see certificates of good standing. If the LLC has already been dissolved, start with reinstating your company.

Does an Illinois LLC pay state tax itself?

An Illinois LLC follows its federal tax classification: a single-member LLC that is disregarded federally has no Illinois income tax filing of its own (it may still file sales tax or withholding returns), while an LLC taxed as a partnership files Form IL-1065 and owes replacement tax (Illinois Department of Revenue).

Rates are from the Department of Revenue's rate table. The trap for a multi-member LLC: the members pay income tax on their shares and the LLC still owes replacement tax. Federal treatment is in how LLCs are taxed, and the S corporation choice is in should you elect S corporation status.

How is Illinois replacement tax figured for a multi-member LLC?

Illinois replacement tax for an LLC taxed as a partnership is 1.5% of its Illinois net income, which can be less than its profit. The IL-1065 instructions build that base in steps:

1. Start with the LLC's federal taxable income and apply Illinois additions and subtractions; the result is base income.
2. Subtract the greater of the partners' personal service income or a reasonable allowance for the partners' services to the LLC.
3. Keep the share of income allocated or apportioned to Illinois.
4. Subtract the standard exemption of up to $1,000. The exemption is zero when the LLC's income before Illinois adjustments is over $250,000.

The step 2 subtraction is required, and the allowance must be reasonable for work the partners actually did, so keep a record of who did what. IL-1065 is due the 15th day of the fourth month after year-end; an extension gives more time to file but not to pay (Department of Revenue). An LLC taxed as a partnership with income or a loss for Illinois must file IL-1065, even in a loss year; that return is also what carries the loss forward.

What do Illinois LLC owners pay personally?

An owner who is an Illinois resident individual owes Illinois income tax at a flat 4.95% of net income, including their share of LLC profit (income tax rates). The share enters the owner's federal adjusted gross income, which is the starting point of Form IL-1040 (Department of Revenue). Nothing is withheld from a resident owner's LLC profit, so an owner expecting to owe more than $1,000 after withholding and credits pays quarterly on Form IL-1040-ES; federal estimates are in quarterly estimated tax payments.

A member who lives outside Illinois changes the filings. A multi-member LLC that has not elected PTE tax generally pays Illinois tax on each nonresident member's share for them (pass-through withholding), which counts toward that member's own Illinois tax (Pub-129). If an owner lives outside the US, start with US LLCs for non-residents.

Does an Illinois LLC need a sales tax or withholding account?

An Illinois LLC needs a sales tax account if it sells, leases or rents tangible goods, including goods it transfers as part of a service, and a withholding account if it has employees. Register through MyTax Illinois before the first such sale or hire (PIO-117; business registration). A member or manager who controls filing and paying sales tax or tax withheld from pay, and wilfully fails to file or pay, is personally liable for the unpaid amount with interest and penalties, even after the LLC is dissolved (35 ILCS 735/3-7). An LLC that files IL-1065 or a corporate return also registers for business income tax. For when to collect, see when you must collect sales tax; for the first paycheck, see setting up payroll.

Is the Illinois PTE tax the same as replacement tax?

No. Replacement tax is required of every LLC taxed as a partnership or S corporation, other than an investment partnership; the pass-through entity (PTE) tax is optional, at 4.95% of the LLC's net income, and each member then claims a credit for their share against their own Illinois tax (Pub-129).

Electing PTE tax does not remove replacement tax: both are figured on the same IL-1065. If an electing LLC does not pay its PTE tax, each member is personally liable for their share of the unpaid tax, penalties and interest (35 ILCS 5/201(p)(6)). A single-member LLC that is disregarded federally cannot elect. For tax years ending on or after December 31, 2026, an electing LLC taxed as a partnership also picks its base each year: its Illinois-resident members' full shares plus nonresident members' Illinois shares, or only each member's income from Illinois sources (35 ILCS 5/201(p)). How to elect, whether the election can be undone, estimated payments and whether it pays off are in PTE tax by state.

Example

These examples are illustrative and use US dollars. They ignore credits, the federal deduction for half of self-employment tax and other adjustments.

A Chicago designer with a single-member LLC

A designer files articles in March and pays $150. Her first annual report is due in the 60 days before March 1 of the next year, for $75, and the same window repeats every year. Her LLC earns $60,000 of profit. The LLC files no Illinois return; the profit goes on her own IL-1040, where the 4.95% rate on that amount is about $2,970 before her exemption allowance.

Two partners in a Naperville LLC

Two equal partners have $100,000 of base income, all earned in Illinois. The LLC files IL-1065. To keep the numbers simple, assume the required subtraction for the partners' services is zero: the $1,000 standard exemption leaves $99,000 of Illinois net income, and replacement tax at 1.5% is $1,485. Each partner also reports a $50,000 share on their own IL-1040. If the partners work in the business, a reasonable allowance for that work comes off first and lowers the replacement tax.

The same partners elect PTE tax

The LLC elects PTE tax on its IL-1065. PTE tax is 4.95% of $100,000, or $4,950, because the standard exemption and the partners' services subtraction do not apply to it. Replacement tax of $1,485 is still due on the same return. Each partner receives a PTE tax credit of $2,475 to claim on their own Illinois return.

Different for you?

• The LLC has two or more members, or adds a second one: the IL-1065, K-1-P statements and the PTE decision start in the first year with two members; get business formation help before the first return.
• You want S corporation tax: read should you elect S corporation status, then set it up with business formation help.
• A member lives outside Illinois or outside the US: see US LLCs for non-residents and get business formation help.
• You already run the business as a sole proprietor: see moving a sole proprietorship into an LLC.
• You are weighing Delaware or Wyoming while working in Illinois: see which state to form in.
• You need an EIN or are unsure which number goes on a W-9: see EINs for single-member LLCs.
• You are unsure about the federal BOI report: see who still files a BOI report.
• The LLC was dissolved for a missed report: see reinstating your company.
• You want to compare yearly fees in other states: see LLC annual fees and reports by state.